Russel Metals Inc 2

I own this stock (TSX-RUS). I have been tracking this stock for a number of years, but I did not buy this stock until 2007 and then I bought it again in 2009. I have earned only 3.2% per year on this stock. Dividend portion of this total return was probably around 6.5%. This stock is categorized as an industrial stock. It is also considered a growth company. You should not be investing in it if you cannot afford the risk that comes with an industrial growth stock.

When I look at insider trading, I find that there is both insider buying (at $1.2M) and insider selling (at $1.8M). The net insider selling is therefore at $.6M. The buying and the selling seem to be by the same people (CEO and officers). What seems to be happening is that insiders are selling off stock options. As with a lot of Canadian corporations, all the insiders, but the directors, have lots more stock options than shares. For example, the CEO has almost 5 times the number of stock options compared to shares he owns.

Management has shown confidence in the future with the recent 10% increase in dividends. However, dividends at $1.10 a share are lower than the $1.85 of 2008, which occurred before the recent crisis. Dividends had been lowered in 2009 to $1.00 a share and stayed at $1.00 in 2010.

When I look at the 5 year median Price/Earnings Ratios, I get a low of 9.5 and a high of 14, when I get rid of the negative P/E Ratios for 2009. However, this masked a great deal of volatility in the P/E Ratios. Either high P/E ratios have been around 20 or around 8 in the last 5 years, (there seems to be no middle ground here). The current P/E 12.7 on a share price of $24.22 is somewhat between the highs and the lows, but a bit closer to the highs.

For Price/Book Ratio, I get a 10 year median value of 1.51. The current P/B Ratio of 1.92 is some 27% higher. This ratio points to a rather current high stock price. The current Dividend yield of 4.5% is good, but the 5 year median dividend yield is 6.3%. Of course, in 2009, they lowered the dividend by 45% and this would have an effect on the current dividend yield.

I get a Graham Price of $23.30. The current stock price at $24.22 is some 4% higher than the Graham price. However, the 10 year median difference between the Graham Price and Stock price is the stock price being some 25% below the Graham Price. Even the 10 year median high difference is a negative 10%. It would seem that each year there was a point where the Stock price was lower than the Graham price. However, the difference between the stock price and Graham price has bounced around a lot.

On an absolute basis the stock price does not look high, but on a relatively basis it does. A P/E Ratio of 12 is not particular high, but rather average. The current stock price is back to where it was in 2005 and 2006. There are a number of analysts that follow this stock and the analyst recommendations are Strong Buy, Buy, Hold and Underperform. The Consensus recommendation would be a Hold. There are a lot of Hold recommendations. (See my site for information on analyst ratings.)

With a Hold recommendation, comes a 12 month stock price of $26 to $27. Some analysts think that the stock might go lower before it goes any higher and therefore there might be some good buying opportunities over the next 12 months for this stock. Analysts talk about this stock being cyclical with a strong balance sheet. Many think it is well run.

This company does metal distribution and processing North America. It operates in three segments of metals service centers, energy tubular products and steel distributors under various names including Russel Metals, A. J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, JMS Russel Metals, Leroux Steel, McCabe Steel, Mégantic Métal, Métaux Russel, Métaux Russel Produits Spécialisés, Milspec, Norton Metals, Pioneer Pipe, Russel Metals Specialty Products, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis. Its web site is here Russel Metals. See my spreadsheet at rus.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.